Keywords: Banks, mergers, payments, small business
Abstract: This article designs a framework for evaluating the causes,
consequences, and future implications of financial consolidation, reviews
the extant research literature within the context of this framework
(over 250 references), and suggests fruitful avenues for future
research. The evidence is consistent with increases in market power
from some types of consolidation; improvements in profit efficiency
and diversification of risks, but little or no cost efficiency
improvements; relatively little effect on the availability of services
to small customers; potential improvements in payments system
efficiency; and potential costs on the financial system from
increasing systemic risk or expanding the financial safety net.
Full paper (6085 KB PDF)
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Last update: January 29, 1999